IMF Warns Oil Shock Could Push Global Growth Down to 2%

International Monetary Fund (IMF) chief Kristalina Georgieva has warned that inflationary pressure is already rising and that the global economy could face a far more adverse scenario if the Middle East war drags on into 2027 and oil prices rise to about $125 a barrel.

The IMF’s initial scenario, which assumed a brief conflict, a modest slowdown in global growth to 3.1% and inflation of 4.4%, is no longer realistic.

Continued fighting, combined with oil prices at or above $100 a barrel and growing inflationary pressure, means the adverse scenario is now materializing. It assumes global growth will slow to 2.5% in 2026 and inflation will reach 5.4%. Under the worst-case scenario, growth would fall to 2% and inflation would rise to 5.8%.

Chevron chief executive Mike Wirth said physical shortages in oil supplies caused by the closure of the Strait of Hormuz would begin to show. Georgieva also warned of a 30%–40% rise in fertilizer prices, which would push food prices up by 3%–6% and affect other sectors.

(reuters, bak)